Attorney’s Fees: Mine, Yours, and Theirs

Although we, as lawyers, don’t much care for it, one of Shakespeare’s most quoted lines is “The first thing we do, let’s kill all the lawyers.” Hopefully, our clients don’t subscribe to that wish, but developers must at times wish that they had more control over which lawyers gets paid and how much.

The problem arises after a project is approved. Frequently, a city or a county will include a condition of project approval which requires the developer to indemnify the city or county and hold it harmless if an opponent sues to set aside the approval. This will include paying the costs incurred by the city or county to pay its lawyers in defending the lawsuit seeking to set aside the approval. This means that the developer is immediately on the hook for two sets of lawyers: its own and the agency’s.

Often in the past, cities and counties left the defense – and thus the cost of the lawyers – up to the developer. It wasn’t cheap, but at least it meant that the developer didn’t have to pay twice. That may be changing. The City of Los Angeles recently authorized the City Attorney to establish a land use/CEQA panel of lawyers who will defend the City at the developer’s expense. The authorization identified five different firms who frequently represent cities and counties. The firms have good land use/CEQA lawyers who are likely to take a more active role in defending project approvals, which means that the developer is more likely to have to pay twice unless it is willing to forego having its own lawyers defend the project. It won’t be surprising if other cities and counties adopt similar programs.

Unfortunately, the number of lawyers whom the developer may have to pay isn’t limited to the developer’s own plus the agency’s. A successful opponent may be entitled to recover its attorney’s fees under a California statute which is generally referred to as the “private attorney general” statute. Normally, even when a contract calls for the prevailing party to recover attorney’s fees, the courts will award only a reasonable amount. The private attorney general statute allows the recovery of even more because a court is entitled to multiply the amount of time reasonably spent and the fee rates reasonably used by the opponent’s lawyers by some factor – which can be as high as two. As an example, a reasonable amount of attorney’s fees incurred by the opponent’s lawyer might be $75,000, but a court could award the opponent as much as $150,000, adding insult to injury. And to heap one more insult on top of that injury, if the developer wins the case, it must still pay its own fees and the agency’s, but is not entitled to recover its fees from the losing parties. The private attorney general statute is a one-way street.

There is a lesson to be learned from all of this. Lawsuits attacking a project are time consuming – a year or more in the trial court, which can be followed by a year or more on appeal – so sometimes an early reasonable settlement is the best way to proceed, and, time is money, particularly if you have to pay three sets of attorneys at the end of the day. For instance, if the lawsuit attacks the use of a negative declaration or the adequacy of an EIR, it may be more prudent and cost effective to have an EIR prepared, in the case of a negative declaration, or, where an EIR was prepared but challenged, to revise it. Of course, this requires that the approvals be set aside which isn’t an attractive alternative and it doesn’t guarantee that there won’t be a later lawsuit after the project has been reapproved – also not guaranteed – but it does reduce the probability of a successful lawsuit the second time around.

The bottom line is that time and expense – including the full range of attorneys’ fees for which the developer may be responsible – must be carefully considered when evaluating whether it is more prudent to settle a CEQA lawsuit early or fight to the end.